A time capsule of the greatest financial mania in the history of mankind, told in real-time by regular folks and patriots. May future generations better understand the madness of crowds, and how power and money corrupt.

October 12, 2008

If they had just let the market cleanse itself, and let the bad companies go bankrupt, instead of running around like lunatics with a different plan every day, would we be better off right now?

Methinks 'twas so.

Capitalism is messy, free markets are messy, but you need to trust them. Once you're banning short sales, closing down trading, propping up some companies while not propping up others, and rushing around trying to stop asset prices from falling, well, then this is what you get.

A disaster.

But now, here we are. Now we have a disaster. Because of a total and complete loss of confidence and trust.

Having Paulson, Bernanke and Bush running around for a year saying "subprime is contained", "the fundamentals are strong" and then a few days ago do a 180 and tell us the world is ending unless we cough up $700 billion within hours, well, that didn't do much for trust or confidence folks. At that point, they were exposed as liars at best or incompetent and clueless at worst.

When history writes the book, they'll find that our government got us into this problem by not properly regulating the financial affairs of the land, because they were corrupted by the REIC. And then our government accentuated this problem with its haphazard, scatter-shot, unpredictable, dishonest and panicked response.

Monkeys.

And people obviously don't trust monkeys.

The Government Is Contributing to the Panic - It's time to let markets do their messy work.

Despite all the hard work and good intentions on the part of our public officials, when economists and historians look back on the current financial crisis they are likely to conclude that government intervention prolonged and deepened it. In particular, officials at the Federal Reserve, the Securities and Exchange Commission and the Treasury Department are to blame for publicly losing confidence in the very economic system they are supposed to protect.

The Fed, the Treasury and the SEC appear to be in a state of panic. A crisis mentality led the custodians of the U.S. capital markets publicly to jettison their lifelong commitments to the capital markets in favor of a series of short-term regulatory quick fixes. Even more troubling, for the past several months the doyens of U.S. fiscal and monetary policy have ignored the most fundamental principle of central banking, which is that the primary responsibility of central bankers is to promote stability and to maintain confidence in the capital markets. Our central bankers appear to have suddenly lost confidence both in their own abilities and in the standard tools of fiscal and monetary policy.

25 comments:

1) Have a fiscal policy that creates immense deficits in good times and bad, burdening America's posterity with staggering burdens of repaying the debt.

2) Eliminate regulation of Wall Street and/or fail to enforce the regulations that already exist, instead trusting Wall Street and other money managers and speculators to manage other people's money with few or no regulations and little oversight.

3) Have an energy policy that disallows producing our own energy and instead requires that we buy energy from abroad, thus making our oil prices highly volatile and creating large balance of payments deficits, lowering the value of the dollar and thus making the problem get progressively worse.

4) Have Congress mandate that banks and other financial entities lend money to persons they know in advance to have poor credit ratings or none at all.

5) Allow investment banks, insurers, and banks to bet their entire net worth and then some on the premise that borrowers known to be improvident will in fact repay those loans.

6) Allow the creation of large betting pools called "hedge funds" that can move markets and control the outcome of trading, thus taking a forum for savings and retirement for families and making it into a rigged casino game that exists primarily to fleece suckers like ordinary working men and women.

7) Have laws that protect corporate officers from being sued for misconduct but at the same time punish lawyers in the private sector who ferret out such misconduct and try to make accountable the people responsible for shareholder and investor losses. If one of those lawyers gets particularly aggressive in protecting stockholders, put him in prison.

8) Appoint as head of the United States Treasury Department a man whose whole life was spent on Wall Street, who became fantastically rich through his peddling of junk bonds at his firm while the firm later sold short those same sorts of bonds.

9) Scare Americans into putting up $750 billion of their hard earned money to bail out the billionaires and their friends who created the market for loans to poor credit risks (The "subprime" market) and the unbelievably large side bets on those loans, promising that such a bailout would save the retirement savings of Americans, then allow the immense hedge funds to make the market crater immediately afterwards.

10) Propose to save the situation by surtaxing the oil industry, which is owned by our fellow Americans, mostly in their retirement plans, thus penalizing Americans for investing in companies that efficiently and legally produce an indispensable product.

11) Insist that the free market requires that banks and insurers with friends of the Secretary of the Treasury be saved but allow other entities not so fortunate to fail, thus creating total uncertainty and terror among financial institutions, and demolishing all of the confidence built up in financial circles since the days of FDR.

12) Then have the Republican candidate say he would keep on the job the Treasury Secretary who facilitated the crisis, failed to protect the nation from the crisis, got the taxpayers to pony up to save his Wall Street buddies, and have the Democratic candidate, as noted, say he would save the day by taxing the stockholders of energy companies.

It's nothing mysterious or crazy. It's just the fact that wealthy, powerful interests - the elite - are highly organized, highly paranoid and psychotic when it comes to protecting and elevating their power and wealth and they don't give a damn about the average joe. They see themselves as seperate from humanity, the masses and the "useless eaters".

America has to be brought down to be merged into Canada and Mexico and the global economic order.

You can't stop a crash. It's like trying to step in front of a freight train. The results will be messy.I almost feel sorry for Bernanke and Paulson. They will go down in most histories as villains. It took all of us working together to make a mess this big.

Japan has little tie to America's toxic securities, but its market melted down anyway, as fear ran wild.

How could the Nikkei have plunged 24 percent in the course of the past week, the steepest decline in 59 years, when the Japanese aren't really involved in the whole global mortgage mess?

Japan has thus become perhaps the most striking victim of collateral damage in the credit crisis. Patrick Mohr, an equity strategist for Nikko Citigroup in Tokyo, cites figures showing that Japanese financial institutions account for a mere 2 percent of the $592 billion in credit-related write-offs worldwide in recent weeks, hardly reason to doubt the integrity of the system.

The United States remains a primary market for Japanese exports, so a slowdown there translates into harder times for the Japanese. Yet until last week those fears hadn't grown into panic. Kubota says that implied volatility of options on Japan's Nikkei stock average—the "fear gauge"— soared to levels far exceeding the wake of the 2001 terrorist attacks or the Asian currency crisis in the late 1990s. "I've never seen it that high."

The yen has been rising partly because of the decline of the carry trade, in which traders borrow yen at ultralow Japanese interest rates and invest the money in higher-return markets elsewhere. Last week the carry trade caved in as investors bailed out of currencies like the Australian dollar, sending its value down by 30 percent, and rushed back to the security of the yen.

Long term, the crash in Tokyo could signal an even more fundamental realignment, says R. Taggart Murphy of Tsukuba University. "If over the long term this crisis means the end of American hegemony over global finance, and the end of the dollar's role as the primary international settlement and reserve currency, Japan will have to restructure its economy and its politics."

Every economist agrees that the fundamental problem is that the banks don't trust each other because they don't know what is on each other's balance sheets. Coincidentally, the ONE THING that our government is not willing to do is to force the banks to open up their books.

The derivatives are the problem.

The derivatives are the problem.

The derivatives are the problem.

Please email your congressmen and tell them to open Citi's/BofA's/Morgan's balance sheet up, calculate the derivatives exposure, and determine whether or not they're worth saving.

Please do not let us throw $700BN at this only to have to throw another $3-4Trillion at it over the next 18 months as the default rate on other bonds skyrockets!!!!

And Henry Paulson, if you're listening, please start using the word DERIVATIVE when discussing the problem.

I can't believe the monkeys brought forward a plan to buy $700 billion of crap paper from Saudi Arabia and China, got it crammed through Congress, and then days after it passed - THEY COMPLETELY JUNK THE PLAN AND DECIDE TO USE THE MONEY TO BUY UP THE BANKS

(which is what I thought would need to be done anyway)

Chickens. Heads cut off. Monkeys.

HP'ers, they truly have no idea what to do.

Be afraid.

But I do think nationalizing the banks globally is the only way out. The only way.

What was Ben's thesis again? That if Hoover would have dropped money from a hot air balloon (they didn't have helicopters back then) on to the streets of New York that the Depression wouldn't have happened?

Hmmm. I'm thinking he was flat-out wrong!

There was no quick fix!

There isn't one now!

We need to hold elections, and let the new government take AT LEAST till the day of the inauguration to develop a LONG TERM course, then we set sail, ignoring the howls from the paid liars.

PS For those who say it's "by design", one can be malevolent and incompetent. Bush, Bernanke, Pelosi, and Paulson fit that bill to a tee.

There is also an amazing theory that claims that the elite use vaccines in a conspiracy to reduce the world's population; vaccines ARE THE REASON THAT THERE ARE TOO MANY PEOPLE! DOPES!

Nigeria just had an explosion of polio after following Alex Jones style quackery.

So yes there are malevolent elites, but they have lost control of the situation.

Ben Stein's list, posted by Keith, is pretty good. It omits a few items:

13. Allow the government-created duopoly in mortgage securities to grow unchecked until they were too big to fail.

14. Ignore the beginnings of the crisis in 2007 and issue platitudes about the soundness of the financial system, rather than work quietly to wind down the derivatives trade before panic arrived.

15. Refuse to change that one section in the bankruptcy code that forbids homedebtors from bifurcating their mortgages into secured and unsecured portions, forcing more and more people into foreclosure.

Yes. Ben Bernanke will go down in history as the worst one because he had the so called expertise in the Depression ere and did nothing to stop this one, the worst one in history. Instead he used his expertise to try and hide what was happening for the sake of the Bush administration's image. He gambled with the well-being of the country and world for the sake of partisan politics and lost. He will be remembered as the Hitler of economics!

Did Hank Paulson, Ben Bernanke, George Bush and the monkeys in Congress crash the stock market and just make matters worse?------------------------------------Yes. The Libertarian's idea of a perfect country is Mexico, where the vast majority is dirt poor, and a handful of rich people own everything.

Say hello to the Libertarian New World Order. The middle class will be wiped out.

Anonymous said... It's all by design. You people need to learn about the New World Order:

A History of the New World Order

It's nothing mysterious or crazy. It's just the fact that wealthy, powerful interests - the elite - are highly organized, highly paranoid and psychotic when it comes to protecting and elevating their power and wealth and they don't give a damn about the average joe. They see themselves as seperate from humanity, the masses and the "useless eaters".

America has to be brought down to be merged into Canada and Mexico and the global economic order.

That's what's going on.

Ignore the New World Order at your own peril.

October 12, 2008 7:51 AM

This writer above is totally correct, but the average American wont take the time to study up on the NWO topics. The plan they have is totally transparent to even the average reader whom is willing to review it with an open mind. There are zillions of hits on the net to search out on it. Is the Laker's Game more important than seeing where YOU are headed? GOT NET?